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Date:   Thu, 05 May 2005
From:   Henry

Tell the truth of the AMT impact on dividends and long-term capital gains. The federal AMT tax rate is effectively 22% above $175,000 AMT income due to the phase out of the $58,000 exemption for married persons, $40,250 for singles and $29,000 for married, filing separately.

Answer

Date:   Fri, 13 May 2005

Hello Henry,

It's true the phase out of the AMT exemption can result in a higher effective marginal tax rate (the tax for each additional $1 of long-term capital gains or qualified dividends.) The exemption is reduced by 25¢ for each $1 over $150,000 for married individuals filing a joint return, $112,500 for singles and $75,000 for married persons filing separate returns. The phase out is completed at $382,000 for married joint, $273,500 for singles and $191,000 for married, separate.

Good luck!

Mike Gray

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IRS Circular 230 Disclosure: As required by U.S. Treasury Regulations, you are hereby advised that any written tax advice contained in this answer was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code.